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What’s the Connection Between a Scatter Diagram and Correlation Analysis?

By Shmula Contributor, Last Updated November 27, 2017

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The scatter diagram is one of the most prominently used tools in modern companies, despite its somewhat aged nature. It’s clear that it still has a lot of potential for providing a deep insight into the way a company operates, especially with regards to drawing up the relationships between its different entities and giving you an adequate overview of how everything is linked together. One of the best benefits of a scatter diagram is that it gives a lot of correlation data, allowing you to use it as a solid foundation for good correlation analysis in the future.

What Does a Scatter Diagram Show?

At its root, a scatter diagram shows the distribution of certain variables’ values across their corresponding ranges. However, by plotting the appropriate variables, interesting links may start to emerge. A properly designed scatter diagram can show you correlations between variables – both positive and negative ones – and when applied correctly, it can even be used to determine how these correlations have changed over time.

This mostly comes down to looking at the best fit line, and choosing the right procedure for coming up with the line is a crucial step in ensuring that the scatter diagram can give you enough viable data to work with. For example, linear regression can work well when you have a guarantee for certain constraints, such as the time duration of the whole project. On the other hand, there might be more appropriate methods for your particular data set, which may not even be among the commonly used ones.

Stacking Data for Proper Quality Control

A great way to use scatter diagrams is to stack their data over time in order to see how certain relationships between variables have evolved. Depending on the frequency of your data collection, this may or may not require a significant change in your collection practices, but as long as you’ve got the fundamental underlying system functioning correctly, you should be able to see good results.

Make sure you have a proper system for keeping track of past iterations as well. A good database for this purpose should provide you with proper access to historic data, and the ability to compare previous sets properly. This may sometimes be complicated when working with more complex data sets that span across multiple variables, but even if you need to come up with a custom in-house solution for the job, it should still be worth the effort in the long run once you start getting good results.

Using All Available Tools

An important point to understand about correlation analysis is that it can be done with a multitude of tools, and scatter diagrams are just one of many. There are various utilities that can give you an adequate overview of your current operations and the way your business is evolving, especially with regards to the relationships between certain variables. Remember that scatter diagrams can work great for some companies and their situations, but they are not so well-suited for other applications. So, for example, just because your main competitor is using scatter diagrams as the main tool for their analysis, this doesn’t mean that you should be doing the same.

On the other hand, if you still haven’t tried integrating scatter diagrams into your analytical workflow, this should definitely be at the top of your priorities list. There is a lot to gain from a proper implementation of this particular tool in most modern organizations, especially those that frequently have to deal with the relationships between the different variables involved in their operation.

Conclusion

Scatter diagrams can assist you in correlation analysis quite well, but they are just one of many tools that can be helpful in this area. It’s important to develop a solid understanding of all aspects of correlation analysis and to familiarize yourself with the full toolset as best as you can, because this is one of the easiest ways to ensure your organization is moving in the right direction in the long run.

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